1. INTRODUCTION – BACKGROUND
1.1. Programme/Legal base
This call for proposals is published under REGULATION (EU) No 1296/2013 of the European Parliament and of the Council of 11 December 2013 on a European Union Programme for Employment and Social Innovation ("EaSI")1 and amending Decision No 283/2010/EU establishing a European Progress Microfinance Facility for employment and social inclusion.
The European Programme for Employment and Social Innovation "EaSI" 2014-20202 is a European-level financing instrument managed directly by the European Commission to contribute to the implementation of the Europe 2020 strategy, by providing financial support for the Union's objectives in terms of promoting a high level of quality and sustainable employment, guaranteeing adequate and decent social protection, combating social exclusion and poverty and improving working conditions.
The EaSI Programme shall, in all its axes and actions, aim to:
(a) pay particular attention to vulnerable groups, such as young people;
(b) promote equality between women and men,
(c) combat discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation;
(d) promote a high-level of quality and sustainable employment, guarantee adequate and decent social protection, combat long-term unemployment and fight against poverty and social exclusion.
Hence, in designing, implementing and reporting on the activity, beneficiaries/contractors must address the issues noted above and will be required to provide detail, in the final activity report on the steps and achievements made towards addressing those aims.
1.2. Policy and economic background
Social enterprises as vehicles for job creation
Boosting Jobs, Growth and Investment is one of the main priorities of the European Union. In line with this goal, the Commission considers entrepreneurship to be a powerful tool in getting Europe growing again and increasing the number of jobs without creating new debt.
Social entrepreneurs and social enterprises3 are drivers of change that operate on the basis of viable business models. Social enterprises develop innovative approaches, models or practices for resolving societal challenges in an entrepreneurial way to promote inclusive, socially fair and environmentally sustainable economic development and social change. Their economic operations cover a broad spectrum of activities (including in particular social and economic integration of the disadvantaged and excluded, social services of general interest, reducing emissions and waste, or producing renewable energy).
Thus social enterprises can help meeting the Europe 2020 targets4 for employment, innovation, climate change and energy sustainability, education and social inclusion.
Lack of or poor access to finance is still perceived as one of the most significant barriers for starting up a social enterprise, ensuring its sustainability and growth. The Social Business Initiative5 emphasized that the funding system for social enterprises is underdeveloped in relation to that used by other businesses. This was confirmed by a study that looked at imperfections in the social investment market6 and a Commission study on mapping of social enterprises and their eco-systems in Europe7, as well as a number of national studies which would confirm that the demand of social enterprises for capital is not met in most parts of Europe.
To be able to access the social investment market, social enterprises have to be 'investment ready'. In this context, specialised capacity building support is important to help social enterprises acquire the skills and knowledge they need in order to raise external investment.
Barriers in the social finance market
Barriers to develop and strengthen the market for social finance have a different weight across Europe, the most relevant being:
On the supply side: lack of suitable financial instruments in place; a shortage of investors prepared to invest; scarcity of significant public sector initiatives; little experience in specifying a sustainable investment strategy and risk/return profile of a social finance fund; lack of capacities and tools to assess the viability of business plans and social impact, insufficient quality of investment proposals, absence of market facilitators (such as qualified intermediaries and market places) or business angels etc.
On the demand side: excessive dependence on grants and insufficient orientation towards capital markets; legal structures which discourage the attraction of (quasi-) equity; lack of transparency of the market for social finance; insufficient experience in making proposals for external financing, or for combining different sources and types of finance (e.g. grants/loans); costs of getting investment ready; insufficient infrastructures /business
1.3. Main Purposes
Social Entrepreneurship support under the European Union Programme for Employment and Social Innovation (EaSI)
One of the objectives of EaSI is to promote employment and social inclusion by increasing the availability and accessibility of microfinance for vulnerable groups and micro-enterprises, and by increasing access to finance for social enterprises.
Through the third axis of EaSI, for Microfinance and Social Enterprise Finance, over 86 million EUR will be earmarked to stimulate, broaden and speed up the development of social finance markets across Europe between 2014 and 2020.
The Commission aims at supporting the development of the impact investment market and facilitating access to finance for social enterprises by making available financing for social enterprises which could take the form of a combination of equity, quasi-equity and loan instruments. The total amount that a social enterprise can receive is EUR 500 000 (state aid rules to be respected). Support under the programme will be limited to enterprises, not listed on the stock market, with a maximum of EUR 30m turnover (most social enterprises are smaller).
For the implementation of the financial instruments under the EaSI Programme, the Commission cooperates with the European Investment Fund. Since June 2015, the EaSI Social Entrepreneurship Guarantee, with a budget of EUR 40m, is operational.
Lessons from previous EU support actions
A European Parliament preparatory action was launched in the past through the call for proposals "Supporting the demand and supply side of the market for social enterprise finance". The pilot initiative aimed at testing the potential of the finance market for social enterprises in the EU, and the development and establishment of feasible, suitable and reliable models that facilitate the access of social enterprises to funding.
The lessons learned from the pilot actions indicate that the finance market for social enterprises in the EU is still at an early stage of development. Building the capacity of the supply side (finance providers/intermediaries) to create partnerships and develop new funding instruments for social enterprises, as well as of the demand side (through capacity building and investment readiness schemes for social enterprises to support their consolidation, growth and scaling) has to continue.
To make the best use of the experience of the pilot actions, a “Practical guide on designing and implementing initiatives to develop the social finance market”8 has been drawn up. The guide is intended to take readers through the thinking and decision-making process that investors or social finance intermediaries can follow in designing and piloting initiatives to develop the demand or supply side of the finance market for social enterprises, pointing out key considerations and possible pitfalls, illustrated by case studies and examples.
2. OBJECTIVE(S) –STRANDS OF THE CALL– EXPECTED RESULTS - MONITORING
The objective of the call for proposals is to contribute to the development of a social finance market by enabling more social enterprises to take on repayable finance for developing and scaling up their innovative business model. The support aims at:
• Boosting the supply of social finance through institution and capacity building with committed actors, and
• Generating effective demand among social enterprises for social finance by developing their “investment readiness”.
As such, the actions to be funded under this call for proposals are expected to contribute to realising the potential of social entrepreneurship emphasised in the Commission’s Social Business Initiative 2011, as well as in the Communications ’Towards a job-rich recovery’ 20129, the ‘Social Investment for Growth and Cohesion’ 201310 and the Guidelines for the Employment Policies of the Member States for 201511.
The main tasks of the actions will be to develop and establish feasible, suitable and reliable financial instruments (Strands A and B) or hybrid finance packages (Strand C), to build capacities to use such instruments (Strand D), or to reinforce the capacity of social enterprise support organisations (strand E). In doing so, the partners implementing an action will explore and test effective ways of establishing, consolidating, sustaining and linking social finance schemes and instruments, capacity building programmes for using such instruments, reinforcing capacities of social enterprise support organisations, and organizing learning on what works and how, as well as what does not work, and why.
The call for proposals is addressed to social finance or support partnerships for social enterprises that have the potential for:
− realising innovative solutions with a clear societal impact, or − scaling their innovative approach through growth,
− replication or adaptation.
Thus, the actions supported under this call for proposals are expected to pave the way for:
− a swift uptake of EU social finance instruments (notably the EaSI instruments and financial instruments under the European Structural and Investment Funds) by the
creation of a pipeline of demand of social finance partnerships capable of using the EaSI instruments to share risk, improve capitalization, and build capacity, in particular from Member States with less developed social finance markets;
− learning from different models and good practice in developing and enhancing social finance across the Union, through organized sharing and disseminating of expertise and experience, and through presenting practical examples that demonstrate how (public-private) partnerships can effectively invest in or complement suitable financial products, as well as develop demand through assisting social enterprises in getting investment ready.
In order to achieve these objectives, the Commission will set up a learning network of the grant beneficiaries, encourage them to incorporate their projects into national, regional, or local development strategies, and assist them in using EU financial instruments, in particular the European Structural and Investment Funds.